Sales Case Reviewer

MIDTERM CASE REVIEWER, AY 2005-2006 Atty. Ray Paolo Santiago

contract of sale Price: money or equivalent The ownership is not transferred upon fulfillment of a condition.

SALES

CHAPTER 1 INTRODUCTION Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. ELEMENTS OF SALE CORONEL VS. CA 263 SCRA 15 (1996) The law on sales does not cover a contract to sell, but only an absolute/conditional contract of sale. The essential elements of valid contract of sale consists of the following: (a) consent or the meeting of the minds to transfer ownership in exchange for the price (b) determinate subject matter (c) price certain in money or its equivalent Obligation and Contracts refers to contract to sell and not the law on sales while Article 1458 refers only to an absolute contract of sale or a conditional contract to sale, but not to a contract to sell. Contract to sell is different from a contract of sale because the first element is missing (consent of the parties) since the prospective buyer still does not agree or consent to the transfer of ownership of the property until a happening of a certain event. Villanueva note: Coronel fails to appreciate the nature of a contract of sale as merely title and not a mode, which does not by its perfection transfer ownership over the subject matter. Absolute/Conditional Sale
With consent Subject matter: determinate object

Price: money or equivalent There is an obligation to transfer ownership upon fulfillment of an obligation or even if the condition is not fulfilled. Remedy: Specific performance

Remedy: No specific performance because this is an obligation to do. You cannot force a person to do an obligation to do because this is tantamount to involuntary servitude. Supreme Court: Contract to sell is PRACTICALLY the same as a contract of sale

GOMEZ VS. CA 340 SCRA 720 (2001) A contract of sale ay either be absolute or conditional. One form of conditional sale is what is termed as contract to sell where ownership or title is retained until the fulfillment of a positive suspensive condition. PENALOSA vs. SANTOS 363 SCRA 545 (2001) When all three elements of a contract of sale are present, there being a meeting of the minds, then a perfected contract of sale arises and its validity is not affect by the fact that previously a fictitious deed of sale was executed by the parties. Villanueva note: the more appropriate term to use when essential elements are not present at the meeting of the minds is to declare it as a no contract situation and not void. MAPALO VS. MAPALO 17 SCRA 114 (1966) Instead of calling the contract void, the SC uses the terms there was no perfected contract of sale or the absence of any of these (essential elements) negates the existence of a perfected contract of sale.

Contract to Sell
With consent Subject matter: to enter into a

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Villanueva note: if the three elements are there, but there is defect or illegality constituting any of such element, the resulting contract is voidable when the defect constitute a vitiation of consent. CHARATERISTICS OF SALE 1. 2. NOMINATE AND PRINCIPAL It is principal for it can stand on its own and not just an accessory contract which depends on another contract for its validity or existence. CONSENSUAL It is perfected by mere consent or from the moment there is meeting of the minds. Non-delivery which is not necessary component to establish the existence of a valid contract of sale does not invalidate the sale or make it void but merely becomes a basis for remedies or either specific performance or rescission with damages in either case (Gabelo vs. CA, 316 SCRA 386, 1999). QUIJADA VS CA 299 SCRA 695 (1998) What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered. Perfection which occurs upon the actual or constructive delivery of the sold. Villanueva Note: Article 1358 which requires the embodiment of certain contracts in a public instrument is only for convenience. The rules on the statute of frauds applies to the sale of real and personal worth more than Php 500.00 but not to barters (Articles 1403. CC). 3. BILATERAL AND RECIPROCAL It imposes obligations on both parties to the relationship (Article 1458 CC) On a contract of sale, being reciprocal, neither party incurs in delay if the other party does not comply or is not ready to comply; but from the moment one of the parties fulfills his obligations, the delay on the other begins (Article 1168, CC). A party cannot simply choose not to proceed with the sale by offering also the other party not to be bound; each party has a remedy of specific performance; no rescission or resolution by the defaulting party upon the party who is ready and willing to proceed. ONEROUS

1. 2. 5.

It imposes valuable consideration as a prestation which is a price certain in money or its equivalent. (Article 1458, CC). There is valuable consideration even if the value s more than just COMMUTATIVE A thing of value is exchanged for another thing of equal value. The test of compliance in the commutativeness of sale: SUBJECTIVE so long as the party believes that he is receiving equal value for what he gave up for then commutativeness is complied with. General rule: Inadequacy of price does not affect ordinary sale (Article 1355 and 1470, CC), it may only show vice of consent. This rule further bolsters the subjective test of the commutative nature of sale. However, subjectivity has its limits: completely ridiculous sales such as a house and lot for Php 1.00 is obviously that this is already a donation. A contract is what the law says it is and not merely what the parties believe it is.

GAITE VS. FONACIER 2 SCRA 831 (1961) If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests thus, a stipulation on the payment of the balance of the purchase price is a suspensive term (and not a condition). In a suspensive term, the obligation is deemed to be actually existing as opposed to a suspensive condition where obligation is viewed to be nonexisting or not binding until the happening of that event. The former (suspensive term) brings about greater reciprocity to the buyer. However, a contract of sale can be subordinated to a suspensive condition (in a sense undermined the commutative nature of a contract of sale) with the party fully aware that he assume risk of receiving nothing for what he gives (as in the case of emptio spei sale of hope or expectancy). 6. SALE IS TITLE AND NOT MODE Sale is a contract transferring dominion and other real rights in the thing sold (Article 1470) this is sale as defined by the SC. Sale by itself does not transfer or affect ownership; at most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale that actually transfers ownership. Perfection of sale does not make one the owner of the thing. It is the delivery that consummates the same (Equatorial Realty Dev. vs. Mayfair Theater).

4.

SALE DISTINGUSHED FROM OTHER CONTRACTS

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PROVISIONS:
OTHER CONTRACTS SALE CHARACTERISTICS OF OTHER CONTRACTS

BARTER Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. AGENCY Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. PIECE OF WORK Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. LEASE Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a) Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.

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1. Donation Onerous Gratuitous Perfected by mere Must comply with formalities mandated by consent law in addition to consent Importance of distinguishing: validity of contract, what law to apply and tax purposes. Ex. If price is simulated, it is a void contract of sale but it may turn out to be a donation which is valid. 2. Barter A part binds One party binds himself to give one thing in himself to deliver consideration of the others promise to give a thing in another thing consideration of the others undertaking to pay price in money or its equivalent How to distinguish: by the manifest intention of the parties (Art. 1468 even if value of the thing component is greater that the money component it can still be sale if it was the intention o the parties. 2. When the intention does not appear: It is barter where the value of the things given as part of the consideration exceeds the amount of money given or its equivalent, otherwise, it is a sale. 3. However, the distinction between the two is academic since barter is governed by the Law in sale. (a) if one of the contracting parties having received the thing promised in barter should prove that it did not belong to the person who gave it, he cannot be compelled to delivered that which he offered in exchange but he shall be entitled for damages (Article 1639, CC) (b) One who loses by eviction the thing received in barter may recover that which he gave in exchange with a right to damages (Article 1640) 3. Contract or Real obligation An obligation to do Piece of Work. Only when the Employer has the right to remove defect or subject matter is have another work be executed at indeterminate or contractors cost (Art. 1714) generic is the buyer granted the remedy to have the matter done by a third part Two tests provided by Article 1467: (1) manufacture in the ordinary course of business (2) Manufacturing upon the special order of customers Article 1467: A contract for the delivery at a certain price of an article which the vendor in the ordinary course of business manufactures or procures for the general market whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order and not for a general marker, its a contract for a piece of work.

Article 1713: By a contact of piece of work, the contract binds himself to execute a piece of work for the employer in consideration of a certain price or compensation, the contractor may either employ his labor or skill, or also furnish the material. Tests: Test of timing (W/N it would not have existed but for a special order/ordinary course of business) (Article 1467, CC and Inchausti case) Test of habitualilty (Celestino vs. CIR) Nature of Work test (W/N product can be produced in the ordinary course of business, if it is, the contract is one of sale) (Celestino case) Nature of product or object test (W/N what is produced is ordinarily available or the capacity to stock pile or mass-produce the product) (CIR VS. EES) Inventory test: (W/N the producer can build an inventory and dispose of the products although he produces upon the special order of customers, the specification of the customer do not transform the nature of the product as acceptable to the general public (CIR vs. ARNOULDUS) Test of intention (if parties intended that at some future date, an object has to be delivered without considering work and labor the contract is one of sale, otherwise, there is a contract for a piece of work) (Tolentino in the case of EMC vs. CA) COMMON THEME: The main distinguishing factor between a contract of sale and a contract for a piece of work is the essence of why the parties enter into it. What is important is to look at the intention of the parties.

1.

1. 2.

If essence is the OBJECT: CONTRACT OF SALE If essence is SERVICE, KNOWLEDGE OR EVEN REPUTATION OF THE PERSON WHO EXECUTES THE OBJECT: CONTRACCT IS FOR PIECE OF WORK.

IMPORTANCE IN KNOWING THE DIFFERENCE: (1) contract of sale is a real obligation and a proper subject of specific performance (2) contract for piece of work is a matter of service to do or obligation to do which would not allow an action for specific performance 4. Agency to Sell Not unilaterally Fiduciary in nature and thus essentially revocable revocable Buyer pays the Agent not obliged t pay the price but price of object merely obliged to deliver the price which he may receive Buyer after Agent does not become owner, even if delivery becomes object is delivered by him owner Seller warrant Agent assumes no personal liability as long as he acts within his authority Profit pertains to Profit pertains to principal not to the the seller agent. Must conform to Valid in whatever form entered into statue of frauds for enforceability

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5. Dacion en Pago Property is sold to Property is alienated to creditor in buyer for a satisfaction of a debt consideration Gives rise to Payment extinguishes a pre-existing obligation of seller obligation and novate the relationship to transfer into a sale. ownership and deliver possession of the subject matter 6. Lease Ownership is Use or enjoyment for a specific period transferred only Note: A conditional sale may be made in the form of a lease with option to by as a device to circumvent the provision of the recto law governing sale of personal property by installments. If rent throughout the term has been paid, title shall vest in the lessee.

underlying transaction as a contract for a piece of work. What is important is to know whether the things are ordinarily available and the ability to stockpile. CASE DOCTRINE FOR AGENCY: QUIROGA VS. PARSONS 38 PHIL 501 (1918) Merely because the relationship between two parties designated the arrangement of an agency did not mean the characterization to be conclusive but it must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties. GONZALO PUYAT and SONS vs. RCO AMUSEMENT COMPANY 72 Phil 402 (1941) Although under their agreement, Puyat was entitled to receive 10% commission, the same did not necessarily make the petitioner an agent of the respondent, as the provision is only an additional price which the respondent bound itself to pay and which stipulation is not incompatible with the contract of purchase and sale. Villanueva note: It is important to look at the subject matter. obligation to deliver is assumed by agent, it is sale. KER AND CO LTD. 38 SCRA 524 (1971) The transfer of title or agreement to transfer it for a price paid is the essence of sale. Even if the things are delivered to the agent, the principal remains ownership thereof. Any stipulation regarding price which makes the agent liable for risk, dominion, ownership or change in price is sale. CASE FOR LEASE FILINVEST CREDIT vs. CA 178 SCRA 188 (1989) When a lease clearly shows that the rentals are meant to be installment payment to a sale contract depicts the nomenclature given by the parties, it is a sale by installments. If any

CASE DOCTRINES FOR PIECE OF WORK: WORK: INCHAUSTI CO VS CROMWELL 20 Phil 345 (1911) The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry of whether the thing transferred is one not in existence a which never would have existed but for the order of the party design to acquire it, or a thing which would have existed and been the subject of sale to some other person, even if the order had not been given. CELESTINO vs. CIR 99 Phil 841 (1956) The essence of a contract of piece of work is the sale of service unlike in a contract of sale where the essence is the sale of an object. The test of special orders is not one of timing or habit but actually must be drawn from the nature of the work to be performed. The essence of a piece of work is the sale of service as opposed to the sale of object. Villanueva note: Article 1467 should not be used as the basis of the difference. A special order does not make an undertaking extraordinary so ling as they are done in the ordinary course of business since the manufacturer may use ordinary skills and equipment even if the product was specially ordered. CIR vs. ENGINERRING EQUIPMENT and SUPPLY CO 64 SCRA 590 (1975) Just because the thing came into existence after ad was motivated to be produced by reason of a specific order does not necessary qualify the

CHAPTER II PARTIES TO A CONTRACT OF SALE

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GENERAL RULE: Art. 1489. All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles. Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in Article 194. 3. Natural persons: those 18 years old and over 4. Juridical persons: corporations, associations and partnerships that have a distinct personality from that of its members. EXCEPION TO THE RULE: RULE THOSE WHO CANNOT ENTER A CONTRACT DUE TO VITIATED CONSENT. Art. 1327. The following cannot give consent to a contract:

Art. 1328. Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable.

EXCEPION TO THE EXCEPTION: EXCEPTION Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in Article 194. Emancipation of minor

SALE BETWEEN SPOUSES Art. 1490. The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation or property under Article 134. CASE DOCTRINES: MEDINA vs. COLLECTOR OF INTERNAL REVENUE 1 SCRA 302 (1961) The following are the reasons why spouses cannot sell properties to each other: to prevent a spouse from defrauding his creditors by transferring his properties to the other spouse To avoid a situation where the dominant spouse would unduly take advantage of the weaker spouse

(1) Unemancipated minors; (2) Insane or demented persons, and deaf-mutes who do not know how to write. Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. Art. 1399. When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him.

to avoid an indirect violation of the prohibition against donations between souses under Article 133 of the CC. MATABUENA vs. CERVANTES 38 SCRA 284

The prohibition also applied to common law relationships since the evils sought to be prevented are also present in common law relationships.

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CALIMLIM-CANLULAS 128 SCRA 675 (1984)

which may be the object of any litigation in which they may take part by virtue of their profession. (6) Any others specially disqualified by law The law prohibits the sale between these parties because of the fiduciary relationship between them, the relationship exists for those protected. The first three relationships may be ratified since it is merely a private wrong. However, the last three cannot be ratified since besides the private wrong, there stands a public wrong which is a damage to public service. Whether or not there is fraud, the contract is still void even if the buyer pays an adequate price. Requirements for the ratification or new contact: new consent, same consideration, same subject matter and must already be outside the prohibited area.

Sales between common law spouses is void not only because Article 1409 of the Civil code declares such as void as being contrary to public policy and that Article 1352 declared them void doe having unlawful cause, but specifically because 1490 prohibits sales between spouses. CRUZ vs. CA 281 SCRA 491 (1997) When a registered property has been conveyed subsequently to a third party buyer in good faith for value, reconveyance is not available to common law spouse seller since under the Torrens system, every buyer has a right to rely upon the title of his immediate seller. OTHER INCAPACITIES Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights

CASE DOCTRINES: RUBIAS vs. BATILLER G.R. No. L-35702 29 May 1973 Rubias was the counsel of his father in law in the land registration case involving the property in dispute. This squarely falls under the prohibition in the civil code, which makes it void for lawyers to purchase property in litigation by reason of trust or their particular control over the property (See article 1409 and 1491). Such sale is expressly prohibited or declared void by law and considered non-existent from the very beginning. The nullity of these sales cannot be cured by ratification since public policy and interest remain paramount and do not permit of compromise or ratification. Santiago note: if we have avoid contract, it can never be ratified. Rubias says that if you want to ratify the old contract, then enter in a new contract. But the SC in using the erm ratification does not mean ratification in its legal sense but rather a new contract. If the new contract merely mirrors the old contract, then what we have is merely a ratification in the old sense which is void and falls under the perpetual disqualification. But of the second contract allows both parties to renegotiate, there is a new consent and thus, the second contract removed all together the first contract. This is what the court meant by ratification which is valid even to cases falling under 4, 5 and 6.

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As long as the parties freely negotiated, then the contract is valid (Rubias)

PHILIPPINE TRUST vs. ROLDAN G.R. No L-8477 31 May 1956 Guardianship is trust of the highest order. The trustee cannot be allowed to have any inducement to neglect his wards interest in line with the courts suspicion whenever the guardian acquires the wards property.

MACARIOLA VS. ASUNCION Adm Case No-133- 31 May 1982 For the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property. After the prohibition, all contract are valid even if it was the judge himself who decided the case. FABILLO VS. IAC G.R. No. 68838 11 March 1991 Article 1491 merely applies if the sale or assignment of the property takes place during the pendency of the litigation involving the clients property. Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition under Article 1491 (5) of the civil code because the payment of said fee is not made during the pendency of the litigation but AFTER judgment has been rendered. DIRECTOR OF LANDS vs. ABABA No. L-26096 27 February 1979 For article 1491prohibits only the sale or assignment between the lawyer and his client, of property which is the subject of litigation. The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property, which is the subject of litigation. A contract for contingent fee is not covered by Article 1491 because the transfer or assignment of the property in litigation takes effect only after the finality of a favorable judgment. NAVAL vs. ENRIQUEZ G.R. No. 1318 12 April 1904 An administrator of a property may also be a heir so that the tendency of prioritizing his interest is Big. The general rule is that an executor cannot lawfully purchase property in his possession. However, this rule does no prohibit the purchase of said executor of the undivided interest of an heir in the estate. What was sold was merely hereditary rights. Executors, even in cases in which they administer the property pertaining to the estate do not administer the hereditary rights of any heir. Santiago note: Go with Naval case.

CHAPTER III SUBJECT MATTER Requisites: 1. it must be a possible subject matter existing have potential existence a future thing even contingent even subject to a resolutory condition. 2. must be licit 3. must be determinate or at least determinable.

Art. 1461. Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void. Art. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency, which may or may not happen. Art. 1465. Things subject to a resolutory condition may be the object of the contract of sale.

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Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. Art. 1460. A thing is determinate when it is particularly designated or physical segregated from all other of the same class. Art. 1463. The sole owner of a thing may sell an undivided interest therein. Art. 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent appears. Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. Santiago note: Void contract are void because they are declared void by law. Inexistent contract are those lacking requirements. If the law does not list them under the void contract such contracts may exist but since it lacks the requirements, they are inexistent. The only difference between void and inexistent comes from licit and illicit matters. In void, the subject is illicit and thus, the law will leave you where you are. Otherwise, there will be mutual restitution because no one should be unjustly enriched. EMPTIO REI SPERETAE (SALE OF FUTURE THINGS)

Sale made in the hoe of uncertain or future profit. This is a contract covering future things and always subject to a suspensive condition that the subject matter will come into existence. All things, which are not outside the commerce of men, including future things, may be the object of a contract. But if the Subject Matter does not come into existence, the contract is extinguished as soon as time expires or if it has becomes doubtable whether the time will take place since the essence of sale is to transfer ownership over a thing. A condition that states that the buyer would not receive the subject matter is void since it goes against the very essence of a sale, which is the meeting of the minds as to the delivery of possession and ownership of the subject matter.

EMPTIO SPEI (SALE OF PRESENT HOPE OR EXECTANCY) The price should be fixed and paid whether there is gain or none. The only condition under 146 for a sale of hope: that the sale of vain and hope or expectancy is void. PICHEL VS. ALONZO 111 SCRA 345 (1982)

Things having a potential existence may be object of the contract of sale. The contract entered into by the parties is not a contract of the lease of the land and the coconut trees. A contract of sale was entered into since the vendor sold, transferred and conveyed by way of an absolute sale all the coconut fruits of his land thereby divesting himself of dominion over the fruits for the seven-year period. Possession of the coconut fruits cannot be said to be possession of the land itself because these rights are different and distinct from each other. A transfer of the accessory is not a transfer of the principal. YU TEK AND CO. VS. GONZALES 29 Phil. 385 (1915) Until thus segregated the vendee does not assume the risk of loss. The case at bar is merely an executory agreement (a contract to sell), a promise of sale and not sale. Hence, there was no perfected contract of sale since the sugar in the case is used as a generic name for the thing sold. The defendant, having defaulted, the plaintiff is entitled to recover Php 3,000, which he paid in advance. Villanueva Note: Under the new civil code, there is a perfected sale in this case since even generic things may be object of sale, provided that they have the quality if being determinable at the perfection if the sale.

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Santiago Note: This case is different from Pichells because the defendant did not deliver since it was not specified where he should be getting the sugar. This is not true in the case of Pichell where the coconut is to be harvested only from the coconut farmland. NOEL VS. CA 240 SCRA 78 (1955) In a contract of sale, it is important that the seller is the owner of the property he is selling. The principal obligation of a seller is to transfer the ownership of the property thus, nobody can dispose of that which does not belong to him. Hilaria cannot validly sell the whole property since she was owner of half of the land only. Santiago Note: There still exists a valid contract even if the seller is not the owner if the thing being sold. However, there will be a breach of contract if: (1) he cannot transfer owners (2) deliver the subject matter. MELLIZA VS. CITY OF ILOILO 23 SCRA 477 (1968) A sale must have for its object a determinate thing, and this requirement is fulfilled as long as a t the time the contract was entered into the object of the sale is capable of being made determinate without the necessity if a new or further agreement between the parties. Arellano Plan was made part of the contract so that when Melizza sold the lot, it only said: anything not part of the 1st contract. SC looked not only that the intention but also the contract since it is still the best evidence. Santiago note: A subject to be determinate must already be contained in the first contract since if a new contract is drawn, it would be unfair to third persons who cannot question said contract. NATIONAL GRAINS AUTHORITY VS. IAC 171 SCRA 131 (1989) The fact that the quantity is not determinate shall not be an obstacle to existence of a contract provided that it is possible to determine the same without the need of a new contract between the parties and therefore complied with the requisite of being determinable. There is already an intention to buy the cavans of rice, thus, the subject matter was determinable.

JOHANNES SCHUBACK AND SONS PHILIPPINE TRADING CORPORATION VS. CA 227 SCRA 717 (1993) Generic objects may be the proper object of a contract of sale provided that they fulfill the characteristic of being determinable at the point of perfection. Santiago Note: There was really an intention to give the quantity of materials to be bought on December 24 so when the quantity was only given on the 29th, there was really no new contract but merely an execution of the contract on the 24th. Villanueva Note: Even when the exact quantity of the subject matter has not been agreed upon, but the parties have in fact come into an agreement as to the quality thereof and the price and terms of payment, there is already valid contract. But when it comes to complying with the obligatory force of the contract of sale, the Johannes case must be limited by determining the quantity based upon a formula agreed upon AT THE PERFECTION OF THE CONTRACT, WITHOUT NEED OF A NEW AGREEMENT. MANANSALA vs. CA 286 SCRA 725 The sale of a lot by a seller who is yet to acquire full ownership thereof from a government agency is valid sale since it involved the sale of a future thing. ATILLANO VS. ATILLANO 28 SCRA 231 (1969) A person sells or buys land a she sees it in its actual setting and not by its mere lot number in the certificate of title. If there is a mistake in the designation of the lot to be sold in the document, the mistake does not vitiate the consent of the parties or affect the validity of the contract. The deed of sale need not be reformed. LONDRES vs. CA 394 SCRA 133 (2002) Lot 2034 could not have been contemplated by the parties since this parcel was never owned by Filomena nor by her mother. As held in the case of Atillano, a person sells or buys land a she sees it in its actual setting and not by its mere lot number in the certificate of title. If there is a mistake in the designation of the lot to be sold in the document, the mistake does not vitiate the consent of the parties or affect the validity of the contract.

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NOOL vs. CA 276 SCRA 153 (1997)

A sale by one who is not the owner of the subject matter is void and therefore the right to repurchase the property is also void. It is true that sale is possible even if the seller was not the owner at the time of sale, provided that he acquires title to the property later on. However in this case it is clear that Conchita can no longer deliver the object of sale to the buyer since the buyer acquired the land already through DBO. If delivery of ownership if no longer possible, such a situation contemplates an impossible service. Santiago note: Even if Conchita can sell something she does not own, this is tantamount to impossible service since the ownership is already possessed by Nool Anacleto. This is the reason why the contract is void. Villanueva note: A sale by one who is not the owner of the subject matter is void and therefore the right to repurchase the property is also void. It is true that sale is possible even if the seller was not the owner at the time of sale, provided that he acquires title to the property later on. However in this case it is clear that Conchita can no longer deliver the object of sale to the buyer since the buyer acquired the land already through DBO. If delivery of ownership if no longer possible, such a situation contemplates an impossible service. QUIJADA vs. CA 299 SCRA 695 (1998) Ownership by the seller on the thing sold at the time of perfection of the contract is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered. Perfection per se does not transfer ownership, which occurs upon the actual or constructive delivery of the thing sold. A perfected contract of sale cannot be challenged on the ground of non-ownership on the part of the seller at the time of its perfection; hence the sale is still valid. UY VS. CA 314 SCRA 69 (1999) As a general rule, a partys motive for entering the contract does not affect the contract. However, when the motive predetermines the cause, the motive may regarded as the cause. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. SELLERS OBLIGATION

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. Art. 1434. When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee.

CHAPTER IV PRICE Requisites: 1. must be real (Article 1471) 2. must be in money or its equivalent (Article 1458 and 1468) 3. must be certain or ascertainable at the time of the perfection of the contract (Article 1469) 4. the manner of payment must be agreed upon Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale. Art. 1469. In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a special person or persons. Defects in the requirements:

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1.

price is not real: (a) if there is false price, there is valid contract subject to reformation (b) If there is no price, then contract is void (c) If there is simulated price, void contract but it may be shown in reality some other contract like donation. Note: two tests to know whether the price is real: (a) test of intention: whether or not the parties intended to give/receive a price (b) test of valuable consideration: if the price is nominal and mere titular, then there is no real price. 2. If money not equivalent. Contract is trill valid 3. contract is inefficacious of the price is not ascertainable. 4. No contract if the manner of payment has not been agreed upon. MAPALO VS. MAPALO 17 SCRA 115 (1966) This case cannot be said to be one merely with false consideration, which would only make the contract voidable. In a false consideration, there was in fact a real consideration but the same is not the one stated in the document. In the case at bar, no consideration whatsoever was received. The statement of one in the deed will not suffice to bring it under the rule on the Civil Code covering false considerations. Thus, the contract signed by the spouses is not merely voidable but void and cannot be subject to prescription. ADEQUACY OF PRICE ONG VS. ONG 139 SCRA 133 (1985) Although the cause was not stated in the contract, it is presume that it exists unless the debtor proves the contrary (Art. 1354, NCC). It is possible for parties to a contract of sale to agree on an adequate consideration and although they will state a false or nominal consideration in their covering deed, it would not affect the validity of the contract of sale, provided that valuable consideration was in fact agreed upon. Inadequacy of monetary consideration does not render a conveyance inexistent for the assignors liberality may be sufficient cause for a valid contract. Fraud or bad faith may render a contract rescissible or voidable but a contract concerning an object certain entered into with cause and with consent, as in the case at bar is valid.

Villanueva Note: Philippine jurisprudence has not accepted the AngloSaxon concept that any consideration is enough to support a contract; what prevails in Philippine jurisdiction is that for consideration to support an onerous contract, such a contract of sale would have to be valuable consideration under the Roman Law. Santiagos note: in this case the presumption that there is a valuable consideration was not overturned. Thus there is a valid consideration. If the presumption is not overturned, then the burden to prove of whether or not here is valuable consideration lies on the person claiming that there is no valuable consideration. BAGNAS VS. CA 176 SCRA 159 (1989) In the new Civil Code, contracts with false cause or which had absolutely simulated or fictitious causes are not only voidable but void contract unless it is shown that they are supported by another true and lawful cause or consideration. It must be noted that INADEQUACY OF CONSIDERATION DOES NOT IMPLY TOTAL WANT OF CONSIDERATION. The failure of the defendant to show that the consideration or cause is valid through proofs of the character and value of the services, past, present and future constituting the principal obligations made the contract void. The onus of the existence of valid and licit consideration lies on the respondents. Failure to do such makes the consideration void. FAILURE TO PAY THE PRICE DOES NOT MAKE THE PRICE VOID. LADANGA VS. CA 131 SCRA 360 (1984) A contract is void an produces no effect whatsoever where the price which appears therein as paid has in fact never been paid by the 0purchaser to the vendor. Such a sale is inexistent and cannot be considered consummated. Villanueva note: This is a wrong doctrine since it is not the payment of the price that determines the validity of the contract. Performance has nothing to do with perfection. If the minds never met on the price, then the sale is void. If there is meeting of the minds, the sale invalid irrespective of the manner of payment agreed upon, or even by the reach of the manner of payment. BALATBAT vs. CA 261 SCRA 128 (1996)

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The fact that the buyer failed to make good the price does no cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191. Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the contract. But in the case at bar, the contract stipulated that the balance shall be paid only upon actual partition of the property. When Roque filed for the rescission of the contract, the land has not yet been partitioned by the court. IT MUST BE IN MONEY OR ITS EQUIVALENT REPUBLIC VS. PHILIPPINE RESOURCES DEVELOPMENT CORPORATION 102 SCRA 960 (1958) Article 1458 of the Civil Code provides that the buyer may pay a price certain in money or its equivalent. This means that payment of the price need not be in money. Thus whether the goods claimed by the corporation to belong to them and delivered by Empire to settle Apostols account is sufficient payment therefore is for the court to pass upon and decide after hearing the parties in the case. The corporation has a positive right to intervene since should the court credit Apostol with the value of the price of the materials delivered by him, then the corporation will be adversely affected. PRICE MUST BE CERTAIN OR ASCERTAINABLE. TOYOTA SHAW VS. CA 244 SCRA 320 (1995) the VSP did not indicate the total purchase price nor the manner by which the balance shall be paid. A definite agreement in the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. MANNER OF PAYMENT OF PRICE MUST BE AGRRED UPON Manner of payment is essential t a contract of sale. The only exception to this rule is when there has already been appropriation by the buyer. In such a case, the court may designate a reasonable price to be paid by the seller, even if the fourth requisite is not complied with. Terms of payment need not be expressly agreed upon when the law supplies by default such term.

DETERMINING PRICE Price is certain if it is designated in pesos and centavos It is ascertainable when (a) it may be determined by a formula or another thing certain (b) when a third party fixes the price (c) when it is in reference to a particular market/exchange, etc Art. 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain. (d) When it is determined by the court. There is no need for further agreement in the above instances. Price is never fixed by one party to the contract unless the price is separately accepted by the other party. Art. 1473. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. Third party fixes the price and not the subject matter. PRICE FIXED by the COURTS 1. where the designated third party fixes the price in bad faith or by mistake 2. when buyer has appropriated the thing sold, he must pay a reasonable price. EFFECT OF UNASCERTAINABILITY Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious (not void there is a valid contract but cannot be given effect). However, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. Ex. third party refuses to fix the price. INADEQUACY OF PRICE Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.

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Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. Exception: in conventional sale, when the inadequacy of price is so gross as to make the price nominal,, the contract is void, since the sake would have no real price, and not for a valuable consideration. ERENETA VS. BEZORE 54 SCRA 13 The fact that consideration was cheap is not a ground for the infirmity of the sale. Inadequacy of price in a contract does not itself validate the contract. EXCEPTION TO THE RULE ON INADEQUACYY OF PRICE: A. Judicial Sales Inadequacy of price may invalidate judicial sale Not a result of negotiations for property is sold without sellers intervention Courts must be allowed to protect the seller form a bad bargain Requirements: 1. Inadequacy must be so shocking to conscience of mane 2. Must be shown that in event of resale, a better price can be obtained. VDA DE GORDON VS. CA 109 SCRA 388 When there is the right to redeem a property to be sold in a judicial sale, inadequacy of price should not be material. B. rescissible contracts

(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; Art. 1386. Rescission referred to in Nos. 1 and 2 of Article 1381 shall not take place with respect to contracts approved by the courts. C. Equitable Mortgages

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate. Remedy: The seller which in this case would be the equitable mortgagor should have the contract reformed or declared a mortgage and pay indebtedness. Buyer should foreclose the mortgage. No rescission. ZAMORA vs. CA G.R. No. 102557 30 July1 996 When the price of sale with the right to repurchase us clearly inadequate, it raises the presumption that the sale is actually an equitable mortgage.

Art. 1381. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof;

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